Apple has joined a consortium of companies including Cisco, Duke Energy, Oracle, and Pfizer to lobby the US government for a tax holiday that would allow corporations to bring home an estimated $1 trillion now parked in overseas accounts.

Without the tax holiday, the companies say they won't spend their overseas earnings in the US, given that they face a 35% tax on their profits generated outside the country. Their plan asks for a temporary break that would enable them repatriate their foreign cash by paying only 5% in taxes, during a one year period.

In return, the companies say they could then justify investing in research, hiring and other domestic spending that would boost the economy, according to a report by Fortune.

What to do with Apple's $60,000,000,000?

Apple currently has cash holdings of $59.7 billion, but it earns more than 60 percent of its revenues outside the US.

In the company's Q1 2011 earnings conference call last month, Apple's chief financial officer Peter Oppenheimer stated that Apple's "tax rate for the quarter was 24.6%, below our guidance of 25.5% due to the one-time benefit of the retroactive extension of the R&D tax credit from January 1, 2010. We expect our tax rate for the remaining quarters of fiscal '11 to be about 25.5%."

Apple hasn't given any indication of what exactly it might do with its vast cash reserves were the US to allow it to bring more of that money into the country with a tax break incentive. Some investors and analysts have pleaded with the company to distribute its holdings to shareholders in the form of dividends.

Apple's chief executive Steve Jobs has noted at previous shareholder meetings that such a move would be a shortsighted use of the company's buying power, and would remove a central pillar holding up the company's valuation. By holding onto the cash, Apple can be prepared to jump on new opportunities as they arise.

This all happened before

The report noted that in a previous tax holiday, granted in 2004, companies had similarly argued that repatriating foreign funds at discounted tax rates would enable them to boost the economy through direct domestic investment.

However, even though the Treasury Department attempted to write rules at the time to ensure the money would be invested locally, most of the cash (60 to 92 percent, according to one study cited in the report) was simply returned to shareholders in the form of stock buybacks and dividends.

"A tax holiday would bring a substantial amount of cash back to the United States and paying that out to shareholders is good for the economy," said the study's co-author Kristin Forbes, who Forbes noted is an economics professor at MIT's Sloan School of Management and was a member of President George W. Bush's council of economic advisers. "But if you're a politician claiming this will create a lot of jobs or new investment, it isn't supported by the data."

Private stimulus package getting hard to ignore

An attempt to replay the 2004 tax break in 2009, as part of President Obama's American Recovery and Reinvestment Act stimulus plan, was supported by a bipartisan group of senators led by California Democrat Barbara Boxer and Nevada Republican John Ensign, but it failed to get more than 42 votes.

At the time, opposition to the plan came from senators who were upset by how, as Boxer acknowledged in the report, companies had previously "abused the spirit of the requirements on how the money needed to be spent" under the previous tax holiday.

The "privately financed stimulus" plan is being looked at skeptically by both rural Democrats and by Tea Party-affiliated Republicans who see the measure as a handout to big corporations, while the new influx of relatively moderate Republicans in the House are likely to be more amicable. President Obama has shown little enthusiasm for the corporate tax holiday in the past, but is meeting with tech industry CEOs on a trip to Silicon Valley tomorrow in what the report referred to as "scouting for opportunities to burnish his relationship with big business."

At the same time, the Treasury is stepping up efforts to find individuals with hidden reserves in offshore accounts, offering amnesty programs that require paying a 5 to 25% penalty on top of regular back taxes and interest on any money that is reported to the government, with the threat that money that isn't voluntarily disclosed will be hit with even steeper penalties and the potential for criminal prosecution.

Typical Corporate Greed.. Corporations feel the deserve special treatment. My wife and I pay about 26% of our income to taxes. How is it that these corporations feel they deserve to avoid paying the same in taxes?

Typical Corporate Greed.. Corporations feel the deserve special treatment. My wife and I pay about 26% of our income to taxes. How is it that these corporations feel they deserve to avoid paying the same in taxes?

They're not trying to avoid taxes altogether, they're trying to bring their money from foreign banks into U.S. banks without being penalized; otherwise, it would be more profitable to keep the money where it is.

So Apple needs a 30% cut app developers hard work, but wants to only pay 5% tax for a whole year? I would bet anything that these corporations once again get their way, and that this gets extended for more than a year. I would also like a "Tax Holiday" for next year, and I promise to buy Apple products with the extra cash in my pocket. No seriously I Promise.

They aren't asking for a hand-out, they are just stating facts: the tax code currently provides disincentives for them to bring that money back to the US. If the disincentives are removed (temporarily), they will behave rationally and take advantage of it by bring it "ashore" and paying US taxes that they would otherwise avoid.

Typical Corporate Greed.. Corporations feel the deserve special treatment. My wife and I pay about 26% of our income to taxes. How is it that these corporations feel they deserve to avoid paying the same in taxes?

Corporations don't "feel", they act in the best interests of their shareholders. If they didn't they would be sued. They act in this way because our tax laws are so out of whack that they must go elsewhere to make the returns that are expected. It's economics.

I really don't see a problem with this. I would rather the money go back to the shareholders so they can spend it on fast women, the best booze, expensive cars, cuban cigars and big yachts instead of wasting it on taxes. Becuse we all see what happens when you give it to the government.

They aren't asking for a hand-out, they are just stating facts: the tax code currently provides disincentives for them to bring that money back to the US. If the disincentives are removed (temporarily), they will behave rationally and take advantage of it by bring it "ashore" and paying US taxes that they would otherwise avoid.

Precisely. A tax holiday for the entire country, in addition to a complete government shut down is in order. It's amazing what we can do if we're not saddled with regulations and taxes.

I really don't see a problem with this. I would rather the money go back to the shareholders so they can spend it on fast women, the best booze, expensive cars, cuban cigars and big yachts instead of wasting it on taxes. Becuse we all see what happens when you give it to the government.

The government could use the money to improve public education and scholarship opportunities so Apple has a better domestic talent pool to hire from.

Sure, why not let Apple and others bring in a trillion dollars tax free. Obama's raising my taxes and local, state and federal agencies are raising fees I pay on everything. We the people can easily afford to pay our own taxes and fees plus Apple's. Let the rich corporations have a holiday. I'll just get a third job so that Steve Jobs can rebuild his Palo Alto home in true style.

Typical Corporate Greed.. Corporations feel the deserve special treatment. My wife and I pay about 26% of our income to taxes. How is it that these corporations feel they deserve to avoid paying the same in taxes?

Because those profits were realized overseas and and taxed at local jurisdiction's rates already. To bring them in, they have to pay additional taxes on top of what they already paid to local jurisdictions. If they don't bring them in, they dont have to pay (which is what they are doing now).

Also, I pay well over 40% of my income to taxes, is it fair that I pay 45% while you pay 26%?

Typical Corporate Greed.. Corporations feel the deserve special treatment. My wife and I pay about 26% of our income to taxes. How is it that these corporations feel they deserve to avoid paying the same in taxes?

Try being less of a poor hobo?
I mean, everyone else, Steve Ballmer, for example, pay WAY less than 25% of their revenue in tax.... only poor people do such ridiculous things.
And it answers your question: corporations ' money is very rich people's money, not "some unknown and faceless entity"'s money. Those people pay very low tax on their income, why should corporations which pay them dividends pay huge taxes, which means less dividends?

Social Capitalist, dreamer and wise enough to know I'm never going to grow up anyway... so not trying anymore.

These corporations aren't trying to bring this money home for our benefit or to be nice to America. They obviously need it here for their benefit. Keep your damn money oversees like you do with your manufacturing jobs. We don't want your 5%.

The US has the second highest corporate tax of the developed nations...I think Japan is the highest.

Not because we raised the tax rate but because the other nations have lowered theirs in an attempt to attract new business investment, etc. And it's working. Large US corporations are getting >60% of their profits from overseas. And may not be hiring in the US but they are, again, overseas!

This emblematic of just how screwed up the US tax system is. 16,000 pages of code. Most of it put in by corrupt (or the very least short-sighted) politicians working for special interest groups. With 271 millionaires in Congress what do you expect?

The corporations don't really pay 34% tax because there are so many loopholes.

There is about $1 Trillion in "loopholes" in the US tax code. Start removing the loopholes and at the same time lower the corporate tax rate so it is more fair for everyone not just the special interests.

Best

PS. When you really think about it, corporations aren't "taxpayers" they are essentially "tax collectors" for the US Government!

You have overseas profits youd like to bring into the US but are choosing not to due to the high rate or have misunderstood the article?

If he had overseas profits as a PERSON he would be breaking the law by not paying tax on them. Companies get overseas profits by financial accounting tricks such as the "double irish" without paying tax as long as they leave them offshore.

These corporations aren't trying to bring this money home for our benefit or to be nice to America. They obviously need it here for their benefit. Keep your damn money oversees like you do with your manufacturing jobs. We don't want your 5%.

Maybe they aren't doing it for the benefit of the general US public but the fact is that if the money does arrive stateside, it will be either:

1) Invested in job creating business ideas in the US
2) Paid out as dividends to mostly US shareholders (where it will be taxed) and spent, saved or invested OR
3) Sit in corporate coffers in bank accounts in banks within the US (where it will be lent out by the banks to borrowers).

Any of the 3 above options will have a positive effect on the US economy and thus on the general public within the US at the cost of the countries where the money is coming from.

EDIT:

I also wanted to add that this is one of the biggest reasons our trade deficit is so bad. US companies are some of the most profitable and best companies out there. They routinely compete on a global scale and make huge profits in foreign countries. However, our tax code creates the incentive for the profits to stay in those countries and they never see US soil (and thus, have no effect on our trade deficit). Meanwhile, US customers buy ridiculous numbers of foreign imports (because they are cheaper) and retailers like Walmart (the world's single largest purchaser of goods made in China) send the money to companies in China.

Why not have this international trade work for us (and by us I mean the US general public) for a change?

I really don't see a problem with this. I would rather the money go back to the shareholders so they can spend it on fast women, the best booze, expensive cars, cuban cigars and big yachts instead of wasting it on taxes. Becuse we all see what happens when you give it to the government.

I agree that this would be positive, even if it just got the money back into the US so it could be distributed to shareholders. You have to remember that the vast majority of shares in a company like Apple are held by pension funds, so if Apple were to pay a huge dividend (which is unlikely given what Apple have said) it would not go to the super rich as people like to imagine, rather it would go to people saving for 401k's. It's also important to remember that if companies did repatriate cash to pay a dividend, the person who the dividend is paid to pays tax on it.

What is not ideal at the moment is the amount of money sat around doing effectively nothing. The trickle down theory only works if the money is set to work to trickle down.

Thats basicly where Apples money is right now. They just want to "launder" it for 5% into the US. So no, Apple is not the "nicer" company while google is the evil monster, both of them try to make the most money possible

If he had overseas profits as a PERSON he would be breaking the law by not paying tax on them. Companies get overseas profits by financial accounting tricks such as the "double irish" without paying tax as long as they leave them offshore.

Unless he's a bright boy and he has his own trust of which he holds over 80%, which does those tricks for him

Social Capitalist, dreamer and wise enough to know I'm never going to grow up anyway... so not trying anymore.

Apple benefits from so called "Free Trade Agreements" that do away with import taxes. Companies like Apple used to do quite a bit of manufacturing in the US because it didn't want to pay import taxes. So, the government caved to corporate demand and did away with these import taxes. Manufacturing went overseas, and all the taxes from wages and what not left with the jobs. Now the States and local governments are broke along with a good chunk of the population. Now, these greedy companies want to save by avoiding even more taxes? Ridiculous.

Let them keep the money there. They want to bring the money back here. They can't spend the profit in China.

Quote:

Originally Posted by bloggerblog

They're not trying to avoid taxes altogether, they're trying to bring their money from foreign banks into U.S. banks without being penalized; otherwise, it would be more profitable to keep the money where it is.

Apple benefits from so called "Free Trade Agreements" that do away with import taxes. Companies like Apple used to do quite a bit of manufacturing in the US because it didn't want to pay import taxes. So, the government caved to corporate demand and did away with these import taxes. Manufacturing went overseas, and all the taxes from wages and what not left with the jobs. Now the States and local governments are broke along with a good chunk of the population. Now, these greedy companies want to save by avoiding even more taxes? Ridiculous.

The trickle down theory doesn't work. Why because nobody forces the rich to share the wealth. If a tax holiday is given, there will be guarantee that stockholders will get a dividend. Apple isn't going to give one.

The money is there in the first place because the government gave these companies another tax break in the form of doing away with import taxes.

Quote:

Originally Posted by PaulMJohnson

The trickle down theory only works if the money is set to work to trickle down.

Would it matter if anything they did (save for burn it) would be better for the US economy than letting it sit outside of our borders?

I would say that Apple is throwing its weight around, using that money as a bargaining chip. So, maybe the legislative lobbying effort will be successful with some economic benefits to some people, but it is still a form of corruption.

Well hate to see this go down the political rabbit hole, but what the heck.

Rule #1. Corporations are for profit.
Rule #2. taxes, any taxes, even down to .000001% can go against rule number 1. There is no such thing as community good etc, workers health etc, if it decrements rule #1.
Rule #3. when in doubt, see rule number 1.

Any arguement about lower taxes etc is a red herring, it wont ever be low enough. Wages won't ever be low enough. Benefits won't ever be low enough.
At some point countries etc have to put there foot down and say 'this is the line'. Doesn't mean you get something for free, but, that also doesnt mean give in to every business (whoa's me) complaint.
What is your line in the sand?

Ok, everyone out of the rabbit hole and back to reality.

Hokey religions and ancient weapons are no match for a good blaster by your side, kid.

The trickle down theory doesn't work. Why because nobody forces the rich to share the wealth. If a tax holiday is given, there will be guarantee that stockholders will get a dividend. Apple isn't going to give one.

The money is there in the first place because the government gave these companies another tax break in the form of doing away with import taxes.

That's true, but in this instance, the rich (companies in this case) would likely share the wealth as the initial report says the majority of companies (though admittedly not Apple) bringing this $1tn back into the country would pay dividends.

Personally I'd rather the dividend earnings be sat in my 401k account than in some companies bank account off-shore where it's no good to anybody.